A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

July 26, 2007

And the long-awaited credit meltdown is here. We have our two big LBO failures, the banks got stuck holding the bag, and now, the real fun starts.

Add these two debt failures to the Countrywide news, the CDO meltdown, the Bear Stearns failures, and the meltdown in Blackstone's IPO, and they all tell a neat and tidy story for those smart enough to listen.

The days of easy credit, CDOs and LBOs are over. The days of passing on the risk are over. The cost of financing some of the recently-announced mega-deals has skyrocketed. New deals won't get done. And it's over. O-V-E-R, over.

How does this relate back to housing? Uh, guess what HP'ers, America's housing crash started this chain of events. Read Manias, Panics and Crashes. After debt parties come the cleanup. And oh, what a mess we have on our hands. Now if the lenders would just Mark to Market and get it over with.

Hat-tip to Calculated for the two links. And yes, I know the car in the photo is a Ferrari, but since that's the car all over my neighborhood, I thought it was appropriate as the debt spigot dries up.

KKR's Banks Fail to Sell $10 Billion of Alliance Boots LBO Debt July 25 (Bloomberg) -- Deutsche Bank AG, JPMorgan Chase & Co. and six more banks are stuck with 5 billion pounds ($10 billion) of loans for Kohlberg Kravis Roberts & Co.'s purchase of Alliance Boots. The banks will keep the senior loans after failing to find investors to buy them, said four people with direct knowledge of the deal,

``If you're a bank, it's a case of once bitten, twice shy,'' said Willem Sels, head of credit strategy at Dresdner Kleinwort in London. ``The banks won't push so hard for LBOs now. The leveraged loan market will have difficulty recovering.''

Bankers Postpone Chrysler Debt SaleBankers raising $20 billion in loans for Chrysler Group have postponed a sale of $12 billion in debt for the auto company and are planning to fund the bulk of that debt from their own pockets for the time being, according to a person familiar with the matter.

Bankers have been unsuccessfully marketing the financing package to major institutional investors since June, but recent turmoil in the mortgage industryhas weakened demand for leveraged loans and high-yield debt. With no investor appetite, the seven banks led by JPMorgan Chase & Co. will instead keep the debt on their books.

For buyout shop Cerberus Capital Management, it was one of the few ways to keep its $7.4 billion acquisition on track. But it was a stunning turn of events that indicated investors were not comfortable taking on debt of the troubled automaker, and showed just how cold the U.S. credit market has grown.

This is so true, Keith. Since banks can't whore out these loans at will, the real fun is going to start now. This is going to slow down deals -- probably not kill them, but definitely slow them down. Eventually this will bite the investment banks in the ass.

My job involves analyzing business transactions to see if they present a risk to certain benefits that my agency insures. We're starting to restructure our department and send out job notices, because we're going to be very busy when it all goes down the drain.

I think the proposed Hexion(Apollo)/Huntsman transaction is going to be a particular bad one. Each company is already loaded up with debt, and Apollo will pile it up with more debt because that's what they do to buy a company. I can't see the banks unloading this.

"and they all tell a neat and tidy story for those smart enough to listen."

That's the key, so I fully expect the trolls to come out and crow about how completely unrelated and irrelevant factoids indicate the world is fine and HP'ers are idiots. Yet, their comments belie who the true idiots are!! Bring it on realtwhore trolls!!

"Bankers raising $20 billion in loans for Chrysler Group have postponed a sale of $12 billion in debt for the auto company and are planning to fund the bulk of that debt from their own pockets for the time being....."----------------------------------Anyone wanna bet they don't hold that debt one day longer than they have to?